Review on the Impact of Fiscal and Monetary Policies on Economic Growth in Iran Focusing on Financial Sector Stress

Recent developments in the global economy have led to re-evaluation and elaboration of some economic concepts. One of the changes in economic and financial theories is the great importance of the relationship between the two real and financial sectors in the economy. In this regard, after the global financial crisis of 2007, the impact of monetary and financial policies on the real sector has been accompanied by many controversies. According to what was mentioned, the present research has tried to introduce an index for the financial sector in Iran's economy in the first stage, so that it can represent the different dimensions of this sector. In the following, the threshold vector regression model was used to determine the nonlinear effects of financial and monetary policies considering the financial stress on economic growth during the period of 1369-1397. The results show that the reaction of economic growth to monetary and financial policies is different depending on the tension in the financial sector. So that only monetary policy has a non-linear effect on economic growth, which is dependent on financial stress. Regardless of the state of tension, fiscal policy has the same effect on economic growth, which is always greater than monetary policy in terms of quantity.